What is accounts receivable financing?
A financial option known as accounts receivable financing enables companies to access funds using their outstanding invoices or accounts receivable, either by pledging them to a lender for a line of credit or selling them to a factoring company under an invoice factoring facility.
Both options provide funding solutions that are very helpful to companies that bill their customers on credit terms.
Why is it beneficial for a company? More and more customers are demanding credit terms from their suppliers and the companies they do business with. Despite their reluctance, many businesses agree to extend credit to remain competitive, which, in turn, creates a cash flow shortage for their company.
Companies use accounts receivable financing and invoice factoring to solve the cash flow issues caused by delayed invoice payments.
For companies that are having trouble with their cash flow, accounts receivable financing may be a viable solution.
In addition to providing instant working capital, it can resolve cash flow problems moving forward.
Accounts receivable financing and factoring have several advantages, including the fact that a company can now grow much faster by extending credit to new customers without affecting its cash flow. It has a quick approval and funding process, and you can choose terms and amounts, avoid long-term contracts, and apply with ease and minimal paperwork.
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